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pricing actuary job description

What is a Pricing Actuary?

A pricing actuary is an expert in risk management and pricing.

They assess and analyze the risk associated with a number of financial products including insurance products, pension funds, investments, and other financial instruments.

Once they determine the risk of a financial product they can price for it appropriately. For example, a pricing actuary’s job description can be to set the appropriate premium for a life insurance product using historical data and statistical analysis based on the risk posed by the life insured.

The role of a pricing actuary is one of many specializations an actuary can follow. There are various different types of actuary in the insurance industry.

This article details the job description and roles & responsibilities of a pricing actuary.

What Does a Pricing Actuary Do?

pricing actuary drawing a pie chart

A pricing actuary is a professional who uses mathematical and statistical methods to determine the cost of insurance products, such as life insurance, health insurance, and property and casualty insurance.

They use data and actuarial models to estimate the likelihood and financial impact of various risks, and then use this information to determine the price of insurance policies.

Pricing actuaries can also work in other sectors outside of insurance. Pricing actuaries can add value at banks, investment managers, pension funds, consulting firms, and government agencies.

As an example, a pricing actuary working in banking will be responsible for calculating the appropriate interest rates to charge on loans and mortgages. Each client borrowing money represents a different type of risk based on various factors (such as their credit score, job status and personal assets) and must therefore be priced at a different rate. In this way the bank charges the appropriate interest rate for the risk the client represents of defaulting on their loan.

Role of a Pricing Actuary

The role of a pricing actuary is to develop actuarial models, analyze large amounts of data, and give advice to companies on pricing products and managing risk.

A major component of the job description of a pricing actuary is to lead the research and development of insurance, banking and investment products. Since they understand the exact cost (and impact on profitability) of making changes to the benefits and fees of insurance, banking and investment products, pricing actuaries can make informed decisions about the appropriate product structure to distribute to the market.

The nature of a pricing actuary’s job requires them to work closely with valuation actuaries to make sure insurance products are designed in a financially sustainable manner. Valuation actuaries are responsible for setting the appropriate capital and reserves aside so that the insurance company will be able to pay out claims even in extreme scenarios. For example, a reserving actuary at a life insurance firm will advise the pricing actuary to build in enough margin in their pricing assumptions to allow for worst case scenarios such as a higher death rate resulting from a pandemic.

The pricing actuary often reports to senior management or the chief actuary. Their main job role is to run profit projections of products the company intends to launch and conduct experience reviews of products that are already live on the market.

Before launching a new business line, the pricing actuary will be involved in business case conceptualization and compilation. Based on the business case, senior management can decide whether to go ahead with a particular project. This will require excellent knowledge of the operating environment and competitors in the industry.

Senior pricing actuaries are responsible for the end-to-end execution and implementation of the pricing on the various products of an insurance company. Junior pricing actuaries are responsible for fewer product lines and only certain components of the pricing function, for example analyzing expenses.

senior pricing actuary job description

In addition to working with valuation actuaries and the chief actuary, pricing actuaries must also collaborate with a number of other stakeholders in the company they work in. These include marketing, sales and legal.

The pricing actuary’s job description is to make sure the insurance, banking or investment product is priced appropriately, is attractive enough to generate sales and doesn’t contravene any rules of regulations. This requires correspondence and collaboration with other departments within the company.

Pricing Actuary Roles and Responsibilities

The roles and responsibilities of a pricing actuary are wide-ranging.

The pricing actuary’s job description could include developing and maintaining pricing models, setting insurance rates, analyzing financial models and data, and providing advice to clients on risk management strategies.

pricing actuary job description and responsibilities

The primary responsibilities in the pricing actuary’s job description include:

  1. 1
    Analyzing data: A pricing actuary uses a variety of data sources, including industry reports, demographic data, and claims data, to assess the risk associated with a particular insurance, banking or investment product. For example, a pricing actuary working for an investment management firm, will analyze the number of withdrawals made from an investment fund, the number of times clients switch between investment funds, the average term and investment size of clients. These factors, among others, will impact the profitability of each client to the investment firm.
  2. 2
    Developing models: The pricing actuary uses mathematical models and simulations to estimate the likelihood and financial impact of various risks, including mortality, morbidity, and loss of property or income. In the example of the investment firm, the pricing actuary must model for risks such as clients withdrawing their funds and no longer paying fees, switching their funds to competitors and reducing their monthly contributions among other things.
  3. 3
    Setting pricing: Based on the results of their analysis, the pricing actuary sets the price of an insurance, banking or investment policy. In order to do this, they must take into account the cost of providing the coverage, the likelihood of claims, and the impact of those claims on the insurance company's financial stability. The pricing actuary working for the investment firm will set the appropriate administration fee for handling the customer’s funds. This fee should be sufficient to cover the investment company’s expenses and pay any future benefits guaranteed to the client.
  4. 4
    Monitoring performance: The pricing actuary regularly reviews the performance of insurance, banking and investment products to ensure that the pricing remains appropriate and that the products are profitable for the insurance company. Returning to the investment pricing actuary, one of their main roles is to perform experience reviews to determine whether the lapses, withdrawals, switches and expenses of the investment company are in line with what was expected when the product was first launched.
  5. 5
    Communicating results: A pricing actuary must be able to effectively communicate their findings and recommendations to stakeholders, including insurance company executives, regulators, and policyholders. For instance, a pricing actuary working on investment products must present profit projections and experience reviews to the company’s board. The pricing actuary’s job description also includes correspondence with regulators to ensure the investment products are priced and designed fairly and protect the customer’s interests.

In addition to the five main roles and responsibilities, the pricing actuary's job description requires extensive knowledge of their country’s insurance and investment environment plus the regulatory requirements pertaining to the products they develop.

They should have excellent knowledge of pricing methodologies, as well as profit margin and return on equity calculations. This includes knowledge of reinsurance and its role in pricing insurance products.

Pricing Actuary Skills

pricing actuary drawing analysis sketch

To fulfill their various roles and responsibilities, the pricing actuary must possess a number of key skills – mainly strong analytical, technical and people skills.

The typical skills include programming, statistical analysis, actuarial modeling, economics, accounting and auditing, and communication.

The pricing needs to have a strong knowledge of these skills and they must be able to apply them to complex problems.

Additionally, pricing actuaries need to keep up with industry trends and regulations, as they often have to advise clients on how to effectively manage their financial products in a compliant manner. This means part of the pricing actuary’s job description is to work closely with the legal department and the industry regulator.

Apart from the technical skills, a pricing actuary needs strong communication skills. Since a pricing actuary often needs to present their findings and recommendations to non-technical colleagues and clients, they should be able to break down complex, technical information into layman’s terms.

In summary, the pricing actuary job description requires you to have:

  • strong technical and analytical skills
  • a high level of attention to detail
  • problem-solving skills
  • excellent communication skills
  • ability to explain complex information
  • interpersonal and relationship management skills
  • programming and data analysis skills
  • leadership and management skills, depending on their level
  • high ethical standards

These skills form an important part of the resume of a candidate pricing actuary.

Pricing Actuary Career Path

The career path of a pricing actuary typically involves obtaining an actuarial qualification, passing actuarial exams, and gaining experience in their field of specialization.

In order to become a pricing actuary, students need to obtain a degree in actuarial science or actuarial mathematics. A degree in business or finance, economics, engineering, mathematics or statistics, risk management and science also provides a firm foundation to become a pricing actuary.

Pricing actuaries with the goal of becoming fully qualified actuaries usually start off as actuarial analysts in insurance firms or at banks or investment firms. During this time, they write a series of professional examinations while working.

As the pricing actuaries gain experience and pass more exams, they can become an Associate or a Fellow of their country’s actuarial body. Examples of these bodies include the Institute and Faculty of Actuaries in the United Kingdom or the Actuarial Society of South Africa (ASSA). Becoming a fully qualified actuary also comes with a higher annual salary.

The career path for a pricing actuary includes opportunities for advancement and specialization. With enough experience and professional qualifications, a pricing actuary can be promoted to more senior roles in their field. More senior roles entail more pricing actuary job responsibilities.

pricing actuary job description and career path

Pricing actuaries working in insurance can choose to specialize in a particular area, such as life insurance, health insurance, pensions or investments, and climb the corporate ladder accordingly.

The career path can be challenging, but pricing actuaries with the right attitude and skill set can advance into senior positions with more responsibility over time. Here are some qualities that can help with actuarial career success.

Pricing actuaries with over seven years' experience in the insurance industry including pricing and product design experience can become managers or directors of actuarial departments, or even become partners in consulting firms.

This will require them to work on multiple projects for various parties simultaneously, while managing a team with multiple deliverables.

Some pricing actuaries with several years of experience move into roles such as chief actuary.

Pricing Actuary Job Description Template

We have also created a pricing actuary job description pdf template outlining the key responsibilities, requirements and skills and qualifications for a pricing actuary candidate. This may be useful for you if you are a hiring manager seeking to hire a pricing actuary. This pdf template can be downloaded from here.

Download the Pricing Actuary Job Description Template Here

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